2. THE NATURE AND ANALYSIS OFPOLITICAL RISK The state poses a
direct threat to MNCs due to their policychanges Political risk the
unanticipated likelihood that a businesssforeign investment will be
constrained by a hostgovernments policy Examples of risk 3. THE
NATURE AND ANALYSIS OFPOLITICAL RISK Risk of doing business in
China Short-term interest Piracy and Counterfeit Government
censorship Tension between US and China Selling American goods in
China Yuan Safety of goods 4. Macro and Micro Analysis of
PoliticalRisk Macro Political Risk Analysis analysis that
reviewsmajor political decisions likely to affect all enterprisesin
the country Micro Political Risk Analysis analysis directed
towardgovernment policies and actions that influenceselected
sectors of the economy or specific foreignbusinesses in the country
5. MACRO RISK ISSUES ANDEXAMPLES Large concern for MNCs if country
doesnt have amarket driven economy Russias control on currency
Indias legal system Ways around it Vietnams joint venture Fear of
foreign government taking control ofcompanies Government Corruption
6. LEVEL OF CORRUPTNESS 2012 7. MICRO RISK ISSUES ANDEXAMPLES
Usually invovlve industry regulations, taxes on specifictypes of
business activity, and restrictive local laws Some MNCs are treated
different than others US steel companies Impact of WTO and EU
regulations Anti-Dumping Act General Electric and Honeywell Ryanair
South American export policies 8. TERRORISM AND ITS
OVERSEASEXPANSION Terrorism the use of force or violence against
others topromote political or social views What is their ultimate
goal? Three types of terrorism Classic terrorism Amateur terrorism
Religiously motivated terrorism Examples Effect of terrorism on
MNCs How should they prepare? 9. ANALYZING THE EXPROPRIATION RISK
Expropriation the seizure of businesses by ahost country with
little, if any, compensation to theowners Indigenization laws laws
that require nationals tohold a majority interest in an operation
Who is most at risk? Ways to avoid expropriation 10. THE ROLE OF
OPERATIONALPROFITABILITY IN RISK ANALYSIS Companies most concerned
if they will make a profit Government regulations that may restrict
profit Having to buy materials from a local company Restriction on
the amount of profit that can be taken out of the country Laws
regarding the wages and salaries that are paid to employees 11.
MANAGING POLITICAL RISK AND GOVERNMENTRELATIONS: DEVELOPING A
COMPREHENSIONFRAMEWORK OR QUANTITATIVE ANALYSIS Political Risks
Transfer Risks: government policies that limit the transfer of
capital, payments, production, people, and technology in and out of
the country Operational Risks: government policies and procedures
that directly constrain management and performance of local
operations Ownership-control Risks: government policies or actions
that inhibit ownership or control of local operations Russias
actions against Exxon Corporation 12. DEVELOPING A
COMPREHENSIONFRAMEWORK OR QUANTITATIVEANALYSIS General Nature of
Investment Conglomerate Investment: Vertical investments:
Horizontal investments: 13. DEVELOPING A COMPREHENSIONFRAMEWORK OR
QUANTITATIVEANALYSIS Special Nature of Investment Relates to the
sector of economic activity, technological sophistication, and
pattern of ownership Three sectors of economic activity Primary
sector: Industrial sector: Service sector: Technological
sophistication Difference? Patterns of ownership 14. ASSESING
POLITICAL RISK 15. DEVELOPING A COMPREHENSIONFRAMEWORK OR
QUANTITATIVEANALYSIS 16. TECHNIQUES FOR RESPONDING TOPOLITICAL RISK
Governments and MNCs must develop political strategies in orderto
prevent risks Relative bargaining power analysis Integrative,
Protective, and Defensive Techniques Proactive Political Strategies
17. RELATIVE BARGAINING POWERANALYSIS MNC bargaining position power
> host country where it isoperating Technology Bargaining power
dependent on Worldwide perception of MNC Experience Legitimacy
Government intervention possible 18. INTEGRATIVE, PROTECTIVE,
ANDDEFENSIVE TECHNIQUES Integrative techniques Appearance of
companies MNC relationship with host country 19. INTEGRATIVE,
PROTECTIVE, ANDDEFENSIVE TECHNIQUES Protective and defensive
techniques Microsoft prefers protective technique Mixed Strategy
Food industry Defensive Strategy Steel Industry 20. PROACTIVE
POLITICALSTRATEGIES Proactive political strategies: lobbying,
campaign financing,advocacy, and other political interventions
designed to shape andinfluence the political decisions prior to the
impact on the firm Political system & distribution of power
determines strategy Transportation, Power & Water Government
influence via Nongovernment Organizations 21. MANAGING ALLIANCES
ISA Alliance = (MNC + Company) + Host Country 22. SUCCESSFUL
MANAGEMENT Situational Conditions Management Instruments
Performance Criteria 23. SUCCESS FACTORS Partner Selection
Cooperation Agreement Management Structure Acculturation Process
Knowledge Management 24. ALLIANCE LIFE CYCLE1. Alliance Start Up2.
Alliance Hockey stick Growth3. Alliance Professional4. Alliance
Mature5. Alliance Sustaining 25. DIVORCES Legal Issues Conditions
of Termination Disposition of Assets and Liabilities Dispute
Resolution Distributorship Arrangements Protection of Proprietary
Information and Property Rights over Sales Territories and
Obligations to Customers 26. ALLIANCE TERMINATION Business Issues
Decision to Exit People-Related Issues Host Government Relations
27. HOST GOVERNMENTS The In-LawsFord and Mazda in JapanStarbucks in
ChinaRussiaVietnam
